Bradesco steps on the digital accelerator

Angelica Mari – January 2019

The Brazilian bank is driving a transformation strategy that is casting it as a disruptive innovator in the fast-changing financial services sector. We get the inside story from board director and former CIO Mauricio Minas.

Bradesco may be Brazil’s second-largest retail bank, with more than 71 million customers, but in many ways the 75-year-old financial services giant is acting more like a fintech startup than any kind of technology laggard.

For the past four years, it has been executing an ambitious digital transformation strategy across its core banking business that has seen the application of artificial intelligence (AI) and biometrics, the mass digitization of its information assets and adoption of open banking functionality — all while courting a new audience of ‘digital native’ customers with a nascent mobile-centric banking brand, Next.

Much of that transformation has been led by Mauricio Minas, who sits on the company’s board of directors and was CIO until January 2019. Minas argues that Bradesco’s customer-facing technologies are equal to — if not ahead of — many banks in the leading economies around the world. However, he is under no illusion that back-office banking systems still represent a formidable challenge.

“While our digital channels and branches are now very efficient, we still have a blue ocean of back-office processes where there is a lot to be done,” he says. “However, if you consider the size of our [legacy] structures five years ago versus what they are today, they are about a third of what they used to be. We have been taking a very structured approach to this, particularly over the last couple of years,” he adds.

The drive to modernize Bradesco’s legacy, dubbed ‘Back Office Zero,’ is one of the bank’s top priorities. At its core has been a major digitization exercise that has focused on unstructured information such as email, voice, video and documents. By digitizing those assets and all the processes surrounding them, the bank is now able to boast that no single transaction occurring at the bank generates a physical document.

According to Minas, that digitization has been a prerequisite for the application of some cutting-edge technologies. It allows activities such as account openings or service contracts to “resolve themselves” with the help of robotic process automation (RPA) and AI, which, he says, are already widely used to increase efficiency.

“There are many processes that cannot be simply eliminated or transformed in the short term. But we can apply RPA to many of those, replacing human activity with robotic processes where possible and adding AI so that the decision tree for those processes becomes more complete,” Minas says.

“Such back-office improvements end up having a positive impact on customer service,” he adds. In many cases, customers benefit by getting the information they require via self-service portals or mobile calls much faster and without a trip to a bank branch. “This automation both reduces cost and enhances customers’ perception of quality,” says Minas.

But the modernization strategy is not all about machines. Bradesco has launched itself into a major staff reskilling program. “We are placing a strong focus on getting our people out of the routine activities of a bank and retraining them to operate in a digital world. That means focusing on soft skills and emotional competencies that help us to understand customers’ needs, for staff to be designers and planners of customer journeys, curators in artificial intelligence, and so on,” he adds.Ramping up the digital business

Preparing staff to work in a digital context is crucial for Bradesco given the importance of new channels for the company: 96% of all transactions at the bank are now carried out online or via mobile devices, and 53% of its 28.1 million checking accounts are now classed as digital.

And that is changing the way the bank uses its infrastructure. “As more services are delivered via digital channels, our branches are getting increasingly smaller and focused on more complex sales, customer relationships and financial education,” Minas says. “The way people use the bank has radically changed: mobility, for example, represents over half of all interactions and that means an improved customer experience as well as a cost reduction for us in these transactions,” he adds.

Minas believes the bank can drive such changes even faster, and he argues that the most significant lever in developing the digital business is Bradesco Inteligência Artificial (BIA), the AI platform it started developing four years ago.

“BIA is an agnostic platform developed using a mix of AI technologies that has now become part of any interaction customers have with us. We believe that BIA will be the engine for a substantial increase in customer value.”

BIA is being used to simplify customer journeys across digital channels. “A good example is the digital wallet, which delivers a lot of benefits — from greater convenience to enhanced security. People are really embracing that form of paying,” Minas points out. “Given the maturity of Brazilian society [in terms of] its exposure to and use of technology, we are in a moment of acceleration. Things will just happen faster,” he adds.

As well as its push into AI, Bradesco has plans to evolve its use of biometric technologies to enrich the customer experience and related security. The bank was the first in South America to add biometric security to its ATMs, which for more than a decade have used pioneering palm-vein scanner technology developed by Fujitsu to verify customers’ identities. The success of that has encouraged the bank to consider the application of other biometrics that can speed customer access to services as well as tighten security.

According to Bradesco, there are plans for a large-scale implementation of voice biometrics in the first quarter of 2019. Facial biometric technology is also currently being developed by the bank’s innovation lab and should be initially trialled early in the year.Chasing the open banking opportunity

There are also some major changes in the wider banking environment that Bradesco is positioning itself to exploit. The move to open banking (the requirement for banks in many countries to provide APIs that enable customers to share or consolidate their banking data across other platforms) is seen as an opportunity rather than as a threat by Minas.

The work around internal modernization is relevant here, he says, because open banking is all about having an architecture that enables the organization to use and offer “bank-as-a-service” capabilities. “Thanks to the efforts we have made to transform the technology over the last few years, today we can sell our products on third-party platforms and also sell third-party products on our platforms.”

Bradesco has high hopes that by making its platforms a hub of transactions, open banking will provide it with a window into consumers’ behavior through advanced analytics.

“Open banking is all about aggregation, being part of a larger ecosystem where the data captured can be monetized,” Minas explains. “So with that level of intelligence, we can proactively offer deals and products to customers. It all becomes a virtuous cycle.”

Minas expects that the first open banking frameworks will be introduced in Brazil by the end of 2019. “We are ready for open banking and doing what is possible today under the current regulations in Brazil,” he says. But in the meantime, the bank is already releasing relevant functionality such as a partner marketplace to sit on its two-year-old Next platform.

As that highlights, Bradesco wants to be a disruptor rather than one of the disrupted in the fast-changing financial services world. “We don’t want to have a defensive strategy to fintechs that come into our space: we want to be as good as or better than them.”

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